Notice

Just a reminder, these posts are not legal advice. This site is the personal blog of Mark Radcliffe and the opinions expressed are those of Mark Radcliffe and not those of his clients, DLA Piper or the clients of DLA Piper.

About Me:

Mark Radcliffe

I have been practicing law in Silicon Valley for over thirty years assisting startups and global companies develop and market innovative products and services. I have participated in multiple business cyles in Silicon Valley from hardware to software to internet to cloud. My projects have included developing the dual licensing business model for open source startup, developing the original domain dispute resolution policy for NSI and assisting Sun in open sourcing the Solaris operating system. Recently, I served on the US Japan Innovation and Entrepreneurship Council (one of ten members) to develop a plan to encourage the innovation in Japan and the United States. I have been working with the same attorneys since 1986 although we have merged with other law firms several times. I am now a partner at DLA Piper, a (relatively) new global law firm formed in 2005 from the merger of three law firms. The firm now has 4200 lawyers in 31 countries and 77 cities. My experience in corporate securities (particularly venture capital) and intellectual property enables me to assist companies structure the financing and intellectual property strategy for developing ane exploiting a new product or service. I and my team work with fifty startups at one time as well as Global Fortune 100. I have been fortunate enough to work with companies in software, cloud computing, semiconductor, health care IT and Web 2.0.

I am looking forward to the upcoming Open Source Think Tank 2011 which we are co hosting with Olliance Group/Black Duck. Andrew Aitken has prepared a great agenda and we are going to have a case study by AOL which they describes as follows: AOL is planning two related open source initiatives: employing open source technologies and practices to improve the innovation and efficiency of their developers and releasing elements of their software portfolio as open source to enrich their ability to deliver content and encourage community contributions. 

This year the Open Source Think Tank will be particularly interesting because of the dramatic expansion in the use and importance of Freedom and Open Source Software (”FOSS”).  We will be discussing the recent completion of many important industry initiatives to make FOSS easier to use: Project Harmony (contributor agreement), SPDX (assisting management of the supply chain by providing a common vocabulary for describing licenses), new Mozilla license and Open Web Foundation (contributor agreements).

The Open Source Think Tank is unique because of the breadth and seniority of those who attend, from CEOs such as Larry Augustin (SugarCRM) and Tim Yeaton (Black Duck) to counsel such as John Noerenberg (Chief IP Counsel, Qualcomm) and Marissa Aufox (Compliance Counsel, Go Daddy Group) to CTOs such as Shawn Douglass (EMC) and Paul Daugherty (Chief Technology Architect, Accenture).

We will also be discussing the recent government initiatives which could dramatically increase the market for FOSS.  I have mentioned these government initiatives in an earlier post. http://lawandlifesiliconvalley.com/blog/?p=607.

We have a few more spaces left for the Open Source Think Tank, but if you are interested you will have to move quickly. http://thinktank.olliancegroup.com/

The recent series of open source projects who are working to integrate with proprietary software (such as the driver for Microsoft’s Kinect and Apache’s Harmony project relating to Java) demonstrates the difficulty the copyright analysis of these types of interaction. Some guidance is available from England: the recent decision in the case of SAS v. WPL provides some guidance. SAS challenged the established view as to the limits of copyright protection for computer programs. However the decision this summer is not final because the court has referred interpretation of certain provisions of the copyright law to the European Court of Justice (”ECJ”).  http://www.bailii.org/ew/cases/EWHC/Ch/2010/1829.html#para332.

Kit Burden, one of my London colleagues, explained that in 2004 and 2007 the English courts confirmed that competitors are free to study how software works in order to write a program mimicking its functionality.  The courts also said that programming languages themselves, and any software interfaces, fall outside of the scope of copyright protection.

SAS, a major player in the analytical software, is challenging this view.  It does so following the actions of WPL, a smaller software house.  WPL studied SAS’s software, wrote its own software (there was no suggestion that SAS’s source code had been copied), tested its software by running it on SAS’s Learning Edition products, and then offered it to customers as a cheaper, alternative to SAS’s product with much of the same functionality.     

SAS’s arguments are essentially:

·         that WPL breached copyright in SAS’s software both indirectly (by studying SAS’s software and SAS’s manuals in order to develop software which would function in the same way) and directly (by using SAS’s Learning Edition to test this new WPL software - in breach of license) and

·         that WPL breached copyright in SAS’s manuals in the way that it used them to develop its own software and, more straightforwardly, simply because WPL’s user manual is so similar to SAS’s user manual 

The English court’s judgment was handed down in the last week of July.  Both sides claim some success. 

The judge did agree that the two user manuals were too similar; WPL will rewrite them. 

However he remained unconvinced as to SAS’s other, more significant, arguments.  On balance, he believes the earlier decisions of the English courts were correct - that programming languages, interfaces and functionality do all fall outside of the protection of copyright.  He also believes that the breached license term was void and unenforceable.  On this analysis, WPL is in the clear. 

However, there remains some doubt.  The judge agrees that interpretation of the relevant legislation is not clear cut and has asked the ECJ for guidance. 

Given the potential to broaden copyright protection to include functionality, “look and feel” and so on, the industry will be closely monitoring this referral.  That said, the ECJ’s opinion is not expected soon. These issues will continue to arise as proprietary software and open source software become more integrated.

I have been reading the debate about “Open Core” which was stimulated by Jorg Janke post about Compiere. http://www.compieresource.com/2010/06/compiere-open-source-failed.html. The open source community owes Jorge Janke a huge debt of thanks for his frank discussion of what happened at Compiere. People are rarely eager to share the details of their failures. I think that the most important lesson from his posting is the critical importance of management that understands its market. The venture capital industry learned this lesson long ago. When making a decision about an investment, venture capitalists focus on the management team; they understand that the technology is important, but great execution with mediocre technology will win over poor execution with great technology. This rule has been established by decades (and thousands) of investments. Open source companies pose particular challenges for management because of the critical role of communities and their expectations in the success of the company. These issues are very different from traditional software companies. Compiere is a very telling example of the nature of those challenges.

This post has launched a discussion of the “open core” business model and whether it is true “open source” http://www.computerworlduk.com/community/blogs/index.cfm?entryid=3047&blogid=41. I have great respect for Simon Phipps and his contributions to the open source community, but I strongly disagree with his statements. I am very concerned that if he is successful, end users will have fewer software programs under open source licenses. This result arises because of the law of unintended consequences: the successful demonization of the open core model will result in fewer venture capital investments in companies using open source licenses.

In the interest of transparency, I work with over twenty open source companies, most of who were funded by venture capitalists and the vast majority of which use the “open core” model. These companies have provided significant value to end users through the software licensed under open source licenses. Simon states: “But to use the package effectively in production, a business probably won’t find the functions of the core package sufficient, even in the (usual) case of the core package being highly capable.” This statement is simply incorrect. I have sat through many Board meetings and, in fact, the conversion rate from “open source” to “commercial” licenses is generally less than 10% for these companies. Thus, more than nine out of ten end users find the functionality of the open source version satisfactory.

Simon says that open core does not provide software freedom for “end users”. Yet, nothing prevents the end users of the open source version to modify it and distribute it or otherwise exercise the rights under the license. In fact, Compiere demonstrates the fallacy of this position because it created two different forks. Simon complains about the lack of access to the “commercial extensions” of open core programs. However, as Marten Mickos notes, the effect on the end user of the employment of the Apache license is the same as the open core model: commercial extensions are not made available to the community. http://webmink.com/2010/06/24/links-for-2010-06-24/#comment-870. I agree with Matt Aslett that the open core model does not violate the Open Source Definition, either literally or in spirit. http://blogs.the451group.com/opensource/2010/07/02/open-core-is-not-a-crime/. (please note that this position is a personal one and does not reflect the view of the OSI which has not yet taken a position on this issue). Simon appears to be suggesting that only a “copyleft” approach in which all of the software must be available under an open source license to meet the Open Source Definition, which is simply incorrect (the Open Source Definition was a reaction to the limitations imposed by the copyleft approach).

I agree with Matt at one level that ultimately this debate will be decided by the market (i.e. end users). However, I don’t agree that it is futile. Most venture capitalists will not invest in companies that do not use the open core model, so if the open source community leaders are successful in demonizing the open core model, they will decrease the willingness of venture capitalists to invest in open source companies (just a reminder, that a recent book, Mastering the VC Game, recently noted that venture capitalists typically look at 300 companies for each company in which they invest). Although not all open source projects need venture capital support, venture capitalists have been a significant source of support for open source projects (as well as new software made available under open source licenses) and end users have been the beneficiaries of their investment. If the open core model is no longer considered open source, the biggest losers will be the end users; they will lose the opportunity to benefit from that investment and that is certainly not consistent with the goals of open source

On June 28, 2010, the United States Supreme Court issued its long-awaited decision in Bilski v. Kappos, No. 08-964, slip op. (June 28, 2010). The Supreme Court was presented with the issue of whether the Federal Circuit’s “machine or transformation” test is the sole test for determining whether a process is patentable under 35 U.S.C. § 101, and more generally, whether business methods can be patentable. The patent application which was the subject of the case tried to patent methods for hedging risk in the field of commodities trading. The claims were classic “business method” claims: they recited steps that were performed as part of a business operation. The patent application was rejected by the Patent and Trademark Office and lost on appeal to the Court of Appeals for the Federal Circuit.

Although the Bilski decision was expected to have a dramatic effect on the patent world and, in particular, the patentability of software, the decision is surprising for how little it decided.  The Supreme Court split into a majority opinion and two concurring opinions. The majority of the Supreme Court agreed only on three points: (1) the Federal Circuit’s machine-or-transformation test is not the exclusive test for patent subject matter eligibility; (2) business methods are not categorically unpatentable; and (3) the invention at issue in Bilski is an unpatentable abstract idea.

The critical part of the decision is as follows:

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.  

And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text. http://www.supremecourt.gov/opinions/09pdf/08-964.pdf

The majority opinion was not revolutionary, but more of a course correction. The Supreme Court affirmed the Federal Circuit’s judgment that the business method was not patentable. At the same time, it found that the Federal Circuit had an improperly narrow view of patent subject matter eligibility. After dismissing the Federal Circuit’s  machine or transformation test as the sole test for determining patentability of process inventions, the Supreme Court refrained from offering any alternative tests or any guidance.

The decision strongly suggests that software remains patentable, although the Supreme Court was careful to state that it was not deciding that any class of technology was patentable.  In fact, the most interesting results in the decision come from analysis of the concurring opinions.  In a very perceptive comment, the PatentlyO blog http://www.patentlyo.com/patent/2010/06/bilski-v-kappos-and-the-anti-state-street-majority.html, notes that by combining the votes of the justices in the two concurring opinions, five justices have rejected the State Street  test of useful/concrete/tangible-result.  As the PatentlyO blog notes State Street was the broadest formulation of the scope of patentability and it is rejected by five of the justices (although not formally disavowed in the majority opinion).  The other interesting result of analyzing the votes in the concurring opinions is that four justices were prepared to find that business methods are not patentable. Those four justices need only one more vote to have a majority for excluding business methods from patent protection. Both of these results suggest the way in which future cases may be decided.

The decision is likely to increase the use of eligibility of patent subject matter as a litigation defense, but will have a less clear effect on patent prosecution. Given the lack of guidance on the standards of patentability, the Patent and Trademark Office will need to find to develop its own tests.  Patent law is likely to remain uncertain in this area for some time to come. 

As I noted in my earlier post http://lawandlifesiliconvalley.com/blog/?p=468  about the recent German Supreme Court decision, Bilski should encourage software companies to include patents as an important part of their intellectual property strategy.

The NY Times published an article about open source yesterday which was very disappointing. The article perpetuated many of the myths and misperceptions about open source.  http://www.nytimes.com/2009/11/30/technology/business-computing/30open.html?_r=2&hpw=&pagewanted=all The first misperception is found in the title: “Open Source as a Model for Business is Elusive”.  Open source is not a “business model.”  It is a development methodology which supports multiple business models as I have discussed in an earlier post. http://lawandlifesiliconvalley.com/blog/?p=147  The article starts from two false premises: (1) open source software is released free of charge to the world and is maintained by volunteers and (2) the revenue for open source companies comes solely from “support” deals.  These assumptions are very dated.  For the last five years, much of the most useful open source software has been created by commercial companies who develop most of the software using their own employees, such as SugarCRM and Zimbra.  Similarly, most open source companies use a combination of license or subscription revenue as well as revenue from support services. For example, MySQL received revenues from licensing of a commercial edition its software as well as “support” revenues.

The most disappointing quote was the following: “Whether open source firms are practical as long-term businesses, however, is murkier.”  The problem is that the long term business strategy of most software companies is “murky” due to the rise of less expensive “open source” alternatives and cloud computing.  The fact that several open source companies were sold at very substantial multiples to their revenues suggests that large software companies view them as valuable.  Moreover comparing the profitability of open source businesses with the traditional enterprise software model fails to take into account the tectonic changes which the traditional software business model is undergoing.  In fact, the traditional enterprise software model has proven  not to be a “long term business” for many proprietary companies. You need only consider the demise of Siebel Systems and PeopleSoft. Open source software is one of the major driving forces in these changes. For example, the Linux operating system is the most serious competitor to Microsoft’s operating system business. The fact that it is supported by IBM, Intel and other large companies is a further testament to its competitiveness and value. Although the Linux code may be contributed by corporate employees, the Linux operating system is continues to be distributed at no charge under the GPL: it is truly an “open source” program.  Moreover,  Linux users do not care whether the contributors are corporate employees or individual “volunteers”.  And Linux has succeeded where proprietary operating systems from major companies, such as IBM’s OS2 failed.

The final part of the article continues the unfortunate pattern: it suggests that the sale of open source companies to larger traditional software companies is a failure of the “open source business model.” It is not. This conclusion fails to consider that more than 90% of venture backed software companies in the past three years have been acquired rather than gone public, whether they used an open source or a proprietary development methodology. These acquisitions prove little about the viability of the ”open source business model” or open source software companies. In fact, they suggest that sophisticated companies are willing to pay a substantial premium for such companies.

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The American Law Institute (“ALI”) approved the Principles of the Law of Software Contracts (the “Principles”) on May 19, 2009. I have discussed these Principles in the past in this blog http://lawandlifesiliconvalley.com/blog/?p=134. Although the Reporters (the title given those managing the project) have made some changes to the earlier draft, the current draft continues to have significant flaws. The Principles were meant to clarify the ambiguity created by conflicting legal decisions and  the application of multiple laws to software licenses, such as intellectual property law (including, most importantly, copyright), Article 2 of the Uniform Commercial Code (“Article 2”) and various consumer laws (the federal Magnusson Moss Warranty Act and state laws such as the Song Beverly Warranty Act in California). Unfortunately, they have made the situation worse because many of their recommendations relating to ”best practices” are new and not consistent with existing law.

The Principles have the stated goal of summarizing the case law and recommending best practices, but the Reporters have included many new concepts which impose consumer type protections on both consumer and business software licenses. Yet consumer and business licenses are quite different because of the negotiation leverage of licensees who are businesses as well as the ability of businesses to enforce their rights. The result is a significant lack of flexibility in negotiating the terms of the license for businesses. Moreover, this dramatic change does not appear to be addressing any significant problem in the market.

The best example of this approach is the new “non disclaimable” warranty of no hidden material defects. This warranty provides that licensors are liable for “hidden” material defects if they are aware of them at the time of the transaction. Yet this warranty is not otherwise found in the case law and incorporates new and difficult concepts, such as “hidden” and “material”.  In addition, the concept of a “non disclaimable” warranty is fundamentally inconsistent with the approach of existing laws including Article 2  and both federal and state consumer warranty statutes. This warranty, if adopted, is likely to lead to significant litigation without any clear benefit to licensees.

The concern about the Principles in the software industry has led to unusual bedfellows: Microsoft Corporation and the Linux Foundation, who are fierce competitors with radically different approaches to licensing, sent a joint letter to the ALI to express their concern about  the provisions in the Principles and request a delay in their approval. The Principles were, nonetheless, approved.  

Despite these flaws, software licensors need to deal with the likelihood that the courts will be influenced by the Principles and need to review their agreements and processes. I will be providing a more detailed discussion of the major provisions in a series of blog posts. The Principles can be purchased at the ALI website at http://www.ali.org/.

 
 
 
 
 
 
 
 

 

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Last year was the one of the most active years for legal developments in the history of free and open source (“FOSS”). http://lawandlifesiliconvalley.com/blog/?p=27   This year, 2008, has seen a continuation of important legal developments for FOSS. My list of the top ten FOSS legal developments in 2008 follows:

1. First Major Appellate Decision for a FOSS License.  Last year, the District Court in San Francisco in Jacobsen v. Katzner decided the first case under US law interpreting an open source license. That decision had the potential to significantly undercut the ability of FOSS licensors to enforce their license.  However in August, the Court of Appeals for the Federal Circuit (”CAFC”) overturned the District Court decision and strongly supported the right of FOSS licensors to obtain copyright remedies for breach of FOSS licenses: such remedies include injunctive relief (an order by the court to the licensee to obey the license) and statutory damages of up to $150,000 for each infringed work. http://lawandlifesiliconvalley.com/blog/?p=64

2.  Final End of the SCO Attack on Linux.   Although SCO’s lawsuits against IBM and others was largely resolved by the decision last year against SCO in its litigation with Novell over ownership of the copyrights to UNIX, several important issues remained. This year the court confirmed its ruling against SCO and awarded Novell $2,547,817 from the amount paid to SCO by Sun. The decision is interesting because the court came to different conclusions about whether licenses to SVRX software in SCO’s agreements with Sun and Microsoft were “incidental”.   This term was important because SCO did not owe royalties to Novell if the license of the SVRX software (the royalties from which would have to be paid to Novell) was ”incidental” to the licensing of Unixware. This case demonstrates the importance of careful drafting in intellectual property licenses.

 3. First Settlement of Patent Infringement Litigation For an Open Source Community.  Red Hat’s settlement of the Firestar litigation demonstrated the need to carefully consider the nature of open source communities on the settlement of patent litigation.  Unlike traditional patent settlements, Red Hat ensured that the settlement covered other members of the community including upstream licensors of products incorporated in the Red Hat product and downstream licensees.  The settlement of patent litigation for open source products needs to deal with the complexity of many open source products and communities. This reality makes settlement of patent litigagtion much more complicated for open source products than for traditional software. http://lawandlifesiliconvalley.com/blog/?s=firestar

4.  Major Litigation on GPL.  In December, the Software Freedom Law Center filed suit against Cisco Systems, Inc. alleging that Cisco had violated the GPLv2 and LGPLv2 in its distribution of certain software whose copyright is owned by the Free Software Foundation, including GNU C Library, GNU Coreutils, GNU Readline, GNU Parted, GNU Wget, GNU Compiler Collection, GNU Binutils, and GNU Debugger. The complaint asserts that Cisco distributed the programs without providing complete and corresponding source code as required by the GPLv2 and LGPLv2. FSF requested that an injunction be issued against Cisco and that damages and litigation costs be awarded to the FSF.  The SFLC states that they filed the lawsuit reluctantly and had negotiated with Cisco for two years on the issues.  The suit raises the question of whether the SFLC is becoming more willing to file suits to enforce the GPL.  For example, the SFLC has been vigorously enforcing the rights under the GPLv2 for Busybox.

5.  Enforcement of GPL for Busybox Continues. The Software Freedom Law Center has continued to enforce the GPLv2 on behalf of the owners of the copyright in Busybox software.  Although most of these cases apparently are settled without litigation, SLFC filed suit three suits this year:  Bell Products, Super Micro Computer, Inc. and Extreme Networks, Inc.

6.  Open Source Litigation from Other Countries. Although litigation about open source licenses has generally been confined to Germany and the United States, one case that settled this year about the enforeceability of the GPL was in Isreal.  The plaintiff, Maryanovsky, claimed that the IchessU software violated the terms of the  GPL because IchessU software did include credit for him and was released under a proprietary end-user license agreement.  He also suggested that an audio-visual module developed by IchessU was a derivative work, since it could not compile without his code.  The case was filed in 2006, but was settled confidenitally this year. 

7.  SFLC Guide to Legal Issues and GPL Compliance.  The increasing ubiquity of open source software as well as the litigation to enforce the GPL and other open source licenses has made understanding the obligations imposed by the GPL very important for a wide range of companies. The SFLC has been the leader in developing and enforcing the GPL. They shared their views of the legal issues in open source and the obligations imposed by the GPL in two publications: “A Legal Issues Primer for Open Source and Free Software Projects” and  ”A Practical Guide for GPL Compliance”.  The Primer and Guide are quite usefull. Although licensing attorneys may not agree with all of their conclusions (the nature of the law and the lack of court decisions make this statement true about most open source license issues), the Primer and the Guide should be read by any lawyer working with open source legal issues.

8.  American Law Institute Publishes Draft of Principles of the Law of Software Contracts with Significant Problems for Open Source Software.   The ALI is a very prestigious and influential non profit institution whose purpose is “to promote the clarification and simplification of the law and its better adaptation to social needs.”  The Principles state that the “best practices” in software licensing would be to include two new “non disclaimable” warranties which would result in significant problems for the open source community. The warranties are the (1) warranty of non infringement of intellectual property rights (such as patents or copyrights) if the contributor knew or should have known of the infringement and the contributor holds himself out by occupation as having knowledge or skill peculiar to the software and (2) warranty of no hidden material defects. Current law (and all OSI approved licenses) permit the contributor (and any licensor) of open source software to completely disclaim all warranties i.e. promises about performance or non infringement which could result in liability to a contributor or a licensor(so called AS IS provisions).  If accepted by the courts, these recommendations would have a significantly negative effect on open source licensors. http://lawandlifesiliconvalley.com/blog/?p=56.

9.  Publication of Version 1.3 of GNU Free Documentation License.  The new version permits the use of the FDL with the Creative Commons Attribution ShareAlike License (CCASL). The draft is an interim one and SFLC is working on FDL 2.0. However, the Wikimedia Foundation requested the FDL be made compatible with the CCASL. This change recognizes the need for the two major branches of “free” content licenses to be compatible just as the GPLv3 was modified to be compatible with the Apache license.

10.   Project Governance Concerns Become More Important. The recent fork in the Twiki community (an open source wiki project) demonstrates the need for a community to think about how it will manage itself.  As open source projects have greater economic value, the potential for the community to split over decisions regarding the direction of the project (in particular, commercialization) will increase. Communities need to develop processes to discuss these issues and come to a conclusion that is supported by the community. Although forks are always an option for open source projects, they generally create significant loss of momentum and can doom a project if it has competitors offering similar functionality. In the case of Twiki, the ownership of the Twiki trademark by Peter Theony, the project leader, was critical to the control of the project.

After a busy year end, I have time to reflect about the last year and developments in open source.  I was particularly interested in the cascade of articles and comments about how the “Open Source” business model is broken started by  Stuart Cohen’s article in Business Week on December 1.  http://www.businessweek.com/technology/content/nov2008/tc20081130_276152.htm. I believe that Stuart is just wrong.  I think that Charles Babcock got it right in his blog responding to Stuart.  http://www.informationweek.com/blog/main/archives/2008/12/open_source_bus.html?cid=RSSfeed_IWK_ALL.  

From my point of view, Charles’ most important point is that  “open source” is not a business model, it is a means of developing and distributing software. And 451 Group makes a similar point in their report on open source business models (which actually pre dated Stuart’s article). http://www.the451group.com/caos/caos_detail.php?icid=694. I represent over fifteen open source startups (as well as large companies developing open source software) and they have  a variety of ways of making money on open source software, ranging from “dual” distribution to support for proprietary additions.  Marten Mickos in his keynote at OSBC in 2007 noted thirteen different ”open source” business models.  http://akamai.infoworld.com/weblog/openresource/archives/OSBC2007%20-%20Marten%20Mickos%20Keynote.pdf.  Second, “open source” cannot be a single business model because it spans a wide variety of different products: the business models for application software are quite different from infrastructure software.  Third, most of the companies that I represent use a mix of business models, such as dual distribution and SAAS.  In fact, even the “dual” distribution model has two forms: the newer model in which the company distributes a commercial version which has additional functions compared to the open source version and the older model in which the open source and the commercial version are the same.  While the characteristics of “open source” development have strong similarities across different types of products, the business models are likely to quite different and will continue to evolve.

The open source community also owes Charles Babcock (and his colleagues at InformationWeek) a vote of thanks for the Analytics report “Open Source Enterprise: Its Time Has Come, And the Price is Right.”  It provides an excellent summary of the state of open source software in the enterprise, with plenty of specific examples.  However, I think that the most interesting part of the report is “What Happens After the Acquisition”.  This section describes the challenges faced in the integration of open source companies into larger companies.  The nature of open source companies and their communities requires a different approach from traditional acquisitions.  In particular, the acquiring companies need to consider carefully the effect on the open source companies employees and their community when modifying the business model. As more open source companies are acquired by traditional software companies, these issues will take on increasing importance. Both sides need to understand that such an integration will require flexibility.

I think that 2009 will be a very interesting year for open source!

Ray Ozzie, Chief Architect of Microsoft Corporation, led off DLA Piper’s Global Technology Leader’s Summit.  In describing the future of computing, he reminded the audience that the existing operating systems were designed in a world of 56k modems.  He believes that the widespread access to broadband has dramatically changed computing.

He noted that the two major trends that will be critical to the future of computing are cloud computing and consumer use of multiple devices. However, these issues are complicated and will vary by country. He noted that in India, the primary “screen” is the cellphone, yet in the PRC, consumers use both the cellphone and the PC. These devices are used very differently and offer different opportunities: the cellphone is very effective in obtaining information with the PC more effective at manipulating information.

He then turned to the growth of social networks and their potential dark side.  He described the problems that the Well and its community had with flame wars and other bad behavior.  He believes that the current social networks need to be careful about how they run their services to avoid these problems. The most interesting point that he made was that frequently what works in a public social network is likely not to work “inside” the corporation because of the different dynamics.

For more information about the Technology Summit, see the official blog: http://www.dlatechlaw.com/